text:
For the purposes of this chapter:

(a) “Actual contingent interest” means the lender’s appreciation share of the net appreciated amount. In no event, however, shall the rate of appreciation upon which actual contingent interest is calculated at the end of the loan term exceed 212 times the rate at which projected contingent interest had been calculated.

(b) “Actual life expectancy” shall be calculated based upon actuarial tables for women only, regardless of the sex of the borrower, and acceptable to both the state and the insurance industry.

(c) “Annuity base amount” means the projected loan amount less (1) the initial advance and (2) the projected contingent interest based on the reasonable appreciation rate used in calculating the projected loan amount.

(d) “Borrower” means the recipient or recipients of a shared appreciation loan for seniors who is obligated by execution of a promissory note and who is at least 65 years of age.

(e) “Borrower’s life expectancy” means the actual life expectancy of the borrower plus no more than five years. In the case of a loan executed by two borrowers, the actual life expectancy shall be based upon the youngest of the two.

(f) “Cessation of occupancy” means the rental to a third party of the right of exclusive occupancy of the subject property, or the abandonment by all coborrowers of the property as his or her residence.

(g) “Lender” means any corporation organized as a public benefit corporation pursuant to the Nonprofit Corporation Law (Part 2 (commencing with Section 5110), Div. 2, Title 1, Corp. C.).

(h) “Lender’s appreciation share” means a proportion not to exceed 25 percent of the appreciation of the property securing the loan calculated in accordance with this chapter.

(i) “Shared appreciation loan for seniors” means any loan made pursuant to this chapter upon the security of owner-occupied real property of a type specified in Section 1917.330, and in connection with which the lender has a right to receive a share of the appreciation in the value of the security property. “Shared appreciation loan” includes a deed of trust and any evidence of debt issued in connection with the loan.

(j) “Maturity event” means the earliest of any of the following:

(1) The death of the borrower. In the case of a married couple who are coborrowers, the death of the surviving spouse.

(2) The date of sale.

(3) The date a loan made pursuant to this chapter is refinanced or repaid in full.

(4) Cessation of occupancy.

(k) “Monthly annuity” means an amount paid in equal monthly installments to the borrower which, together with interest calculated at the stated rate, shall exhaust the annuity base amount during the borrower’s life expectancy.

In the event that the calculated monthly annuity exceeds the cap or ceiling determined in accordance with this subdivision, the lender may limit the actual monthly annuity payment to an amount not lower than the cap. If the cap is imposed, the lender’s appreciation share shall be limited to 25 percent times the ratio between the actual capped monthly payment and the monthly payment calculated in accordance with the first sentence of this subdivision. For example, if the monthly payment calculated in the first sentence is five thousand dollars ($5,000), but the lender applies a two thousand five hundred dollar ($2,500) ceiling, the lender’s share of the home’s appreciation shall be likewise reduced by 50 percent.

The minimum cap shall be two thousand five hundred dollars ($2,500) for loans made during the calendar year 1989. In subsequent calendar years, the minimum cap shall be two thousand five hundred dollars ($2,500) increased to reflect the proportional increase in the Consumer Price Index for the State of California, as determined by the United States Bureau of Labor Statistics, for the period from January 1, 1989, until the November monthly index figure for the year prior to the year in which the loan agreement is entered into.

(l) “Net advance” means any lump-sum advance of funds by the lender to the borrower made at the time of the loan closing. Net advance shall not exceed 15 percent of the projected loan amount.

(m) “Net appreciated value” means the difference between the fair market value of the property securing the loan at the time the loan is made and the fair market value of the property securing the loan at the time of the maturity event, less any credit for approved improvements made during the term of the loan.

(n) “Prevailing rate” means the yield of a 30-year mortgage commitment for delivery within 30 days for a standard conventional fixed rate mortgage of the Federal Home Loan Mortgage Corporation.

(o) “Projected contingent interest” means the lender’s appreciation share of the projected appreciation of the property securing the loan from the date of the loan until the end of the borrower’s life expectancy, using the same reasonable projection of annual appreciation used in determining the projected loan amount.

(p) “Projected loan amount” means not less than 75 percent of the estimated fair market value of the borrower’s home at the end of the borrower’s life expectancy, calculated by applying to the fair market value a reasonable projection of appreciation over the borrower’s life expectancy based on a reasonable projected annual appreciation rate of the fair market value of the home.

(q) “Sale” means any transfer of title to the property and includes the execution of an installment sale contract giving the purchaser a right to possess the property before transfer of title, refinancing, judicial sale on execution, or other legal process of foreclosure or trustee’s sale, but “sale” does not include a transfer specified in Section 2924.6 if any spouse to whom the property is transferred is also a coborrower.

(r) “Stated interest rate” means a total interest rate of not more than four-fifths of the prevailing rate.

(s) “Total loan obligation” means the net original loan and the sum total of all monthly annuity payments received by the borrower, with interest on all outstanding amounts calculated no more often than monthly at the stated interest rate, and actual contingent interest plus interest at the prevailing rate as disclosed to the borrower at the time the loan was entered into on all of the above amounts from the date of any maturity event until the outstanding loan obligation is repaid in full. In no event shall the total loan obligation exceed the actual fair market value of the home on the date of the maturity event.

history: (History: Amended by Stats. 1988, Ch. 1406, Sec. 1.)

title: 4. LOAN

article: 1. Definitions

path: 4. LOAN > 7. Shared Appreciation Loans for Seniors > 1. Definitions


kind: section

code: CIV

text:
Lenders may make shared appreciation loans for seniors pursuant to this chapter for the refinancing of real property improved with one- to four-dwelling units, including structures ancillary to such dwelling units and including attached single-family dwelling units, single-family mobilehome units, residential condominium units, and dwelling units within a planned unit development. Shared appreciation loans shall be made to refinance only owner-occupied dwelling units, but in the case of two- to four-unit dwellings financed under this chapter, only one of the units need be owner-occupied. A dwelling unit shall be conclusively deemed to be owner-occupied for purposes of this chapter with respect to initial qualification for participation in the loan program if a borrower certifies in writing to the lender at the time the loan is made that he or she will occupy the property.

Nothing contained herein shall be deemed or interpreted to restrict a lender from providing a shared appreciation loan based solely upon the value of the real property upon which the borrower’s dwelling is situated, secured only by that real property and not by the improvements thereon. In that case, the lender’s actual contingent interest, and any other necessary calculations, shall be based upon the land value alone, not taking into account any improvements thereon. This paragraph is declaratory of existing law.

history: (History: Amended by Stats. 1988, Ch. 1406, Sec. 2.)

title: 4. LOAN

article: 2. Terms and Conditions

path: 4. LOAN > 7. Shared Appreciation Loans for Seniors > 2. Terms and Conditions


text:
(a) A shared appreciation loan for seniors shall include all of the following:

(1) The term of the loan shall be for an open-ended term, terminating upon the occurrence of a maturity event, or the failure of the borrower to meet the terms of a deed of trust granted by the borrower to the lender which are normally and customarily used by mortgage lenders in this state for loans secured by residential real property. However, if the maturity event is either cessation of occupancy of the property by the borrower or death of the borrower, the term shall be extended until the earlier of the sale or refinancing of the property or 12 months after the occurrence of the maturity event.

(2) An initial advance, if desired by the borrower.

(3) Monthly annuity payments which shall continue until the occurrence of a maturity event, or earlier termination in accordance with paragraph (1).

(4) Interest on (2) and (3), calculated no more often than monthly at the stated interest rate.

(5) Actual contingent interest.

(6) Interest on paragraphs (2) to (5), inclusive, compounded no more often than monthly, from the date of a maturity event until the loan is repaid in full.

(b) The loan shall be secured by a deed of trust on the real property financed.

(c) The aggregate amount of any fee charged to the borrower by the lender for processing an application, preparing any necessary documents, obtaining a credit report, or any other costs incurred by the lender in connection with originating a shared appreciation loan for seniors shall not exceed five hundred dollars ($500). No prepaid interest shall be charged to the borrower.

history: (History: Amended by Stats. 1988, Ch. 1406, Sec. 3.)

title: 4. LOAN

chapter: 7. Shared Appreciation Loans for Seniors

article: 2. Terms and Conditions


text: Any provision in any loan made pursuant to this chapter for the discontinuation or termination of a monthly annuity other than upon the occurrence of a maturity event is void and unenforceable.

history: (History: Added by Stats. 1984, Ch. 1701, Sec. 1.)

title: 4. LOAN

article: 2. Terms and Conditions


text: (a) The borrower shall have the right to prepay, at any time, in full or in part, the total loan obligation.

title: 4. LOAN

article: 2. Terms and Conditions


text: Except as provided in this article, the terms and conditions of the shared appreciation loan for seniors shall be subject to all laws applicable to loans in effect on the date the loan is made.

title: 4. LOAN

article: 2. Terms and Conditions


text:
The borrower, at any time for the purpose of facilitating a sale of the property or prepaying or refinancing the loan, may request the lender to stipulate the minimum amount which the lender considers to be the fair market value of the property for the purposes of this chapter. The lender shall advise the borrower within 10 working days of the receipt of such request of the lender’s estimate of the minimum fair market value. The estimate shall remain effective for purposes of this section for 90 days. For the purposes of this section and Section 1917.411, a sale of the property shall be deemed to have occurred within the 90-day period if there is a valid contract entered by an offer and acceptance within the 90-day period for the sale of the property. The lender’s stipulation shall remain effective for an additional 60 days following execution of the sale contract to permit completion of the sale and close of escrow.

The lender shall not be liable to the borrower or any other party on account of damages alleged as a result of providing the stipulation or estimate required by this section if such stipulation or estimate is made in good faith. Evidence of lack of good faith shall include, but not be limited to, a showing that the lender has willfully or repeatedly overrepresented the fair market value of other properties in similar situations, applying equitable principles to those determinations. The lender shall be conclusively presumed to have acted in good faith and no action may be brought or maintained against a lender which arises out of the provision by the lender of such stipulation or estimate, if the lender relied upon an appraisal of an independent appraiser approved by the Federal National Mortgage Association.

title: 4. LOAN

article: 3. Determination of Fair Market Value

path: 4. LOAN > 7. Shared Appreciation Loans for Seniors > 3. Determination of Fair Market Value


text:
(a) In the case of a sale for cash within 90 days after the lender stipulates, under the provisions of Section 1917.410, a minimum amount which the lender considers to be the fair market value of the property, the fair market value shall be the gross sale price, unless the gross sale price is below the minimum amount stipulated by the lender and the lender contests in writing the reasonableness of the gross sale price in relation to the fair market value within 10 working days of the lender’s receipt of notice of the gross sale price from the borrower, in which case fair market value shall be the greater of gross sale price or the amount determined under Section 1917.412.

(b) In the case of a sale for cash where the borrower has not requested the lender under the provisions of Section 1917.410 to stipulate to the minimum amount which the lender considers to be the fair market value of the property or where the stipulated minimum amount was provided by the lender more than 90 days prior to the date of sale, fair market value shall be the gross sale price, unless the lender contests in writing the reasonableness of the gross sale price in relation to the fair market value within 10 working days of the lender’s receipt of notice of the gross sale price from borrower, in which case fair market value shall be the greater of the gross sale price or the amount determined under Section 1917.412.

(c) In the case of a sale which includes consideration to the seller other than cash, fair market value shall be as determined under Section 1917.412.

(d) If the shared appreciation loan is prepaid in full, or upon the occurrence of a maturity event, fair market value shall be as determined under Section 1917.412.

title: 4. LOAN

article: 3. Determination of Fair Market Value


text:
When Section 1917.411 requires the application of this section, the fair market value shall be determined by averaging two appraisals of the property performed as described in this section. If possible, the appraisals shall be based on the sale prices of comparable properties in the market area sold within the preceding three-month period. The appraisals shall be made upon request of the lender by two independent residential appraisers, one to be selected by the lender and one by the borrower. Each appraiser shall be approved by the Federal National Mortgage Association. The cost of the appraiser selected by the lender shall be borne by the lender, and the cost of the appraiser selected by the borrower shall be borne by the borrower, unless the average of the two appraisals equals or is less than the gross sale price of the property, in which case the lender shall also pay the fee of the borrower’s appraiser up to two hundred dollars ($200). If either of the appraisers determines that the gross sale price does not reasonably reflect the fair market value of the property, or, in the case of a sale for which appraisal is required by this section, then the fair market value of the property shall be determined as the average of the two appraisals. If the borrower fails to select a qualified appraiser within 15 days after the lender has notified the borrower in writing of the lender’s request for an appraisal of the property, the reasons therefor, and the borrower’s option to select an independent appraiser within 15 days after the lender’s request is submitted to the borrower, the lender may designate the second appraiser, provided the lender’s request informs the borrower of this time limitation, and that the lender will select an appraiser on behalf of the borrower in the event the borrower fails to designate an appraiser, with consequent cost to the borrower. If pursuant to this section the lender designates the second appraiser, the cost of both appraisals shall be borne equally by the borrower and lender. If in any case the property has been damaged (other than normal wear and tear) and the damage has not been fully repaired, the determination of fair market value shall be based on the condition of the property not including the damage.

Nothing in this section shall preclude the borrower and lender from establishing the fair market value of the property by mutual agreement in lieu of appraisals pursuant to this section.

title: 4. LOAN

article: 3. Determination of Fair Market Value


text:
The borrower may have the value of capital improvements added to the fair market value of the borrower’s property, for purposes of determining the total loan obligation, but only if the procedures set forth in this article are followed.

(a) Within 60 days following the completion of capital improvements during any 12-month period with a cost in excess of one thousand dollars ($1,000), the borrower shall send by first-class mail a notice of the completion of the improvements to the lender and shall submit proof of cost and an estimate of the increase in value of the property by reason of the improvements.

(b) If, within 30 days of receipt of the notice, the lender questions the claimed increase in value of the property by reason of the improvements, the lender and the borrower may, by mutual agreement, establish the value of the capital improvements or the lender may require appraisal of the property. An appraisal shall be made to determine the increase in value of the property, if any, by reason of the improvements, by two appraisers selected in the same manner specified in Section 1917.412. If appraisals are performed, the increase in value resulting from the improvements for the purposes of this section, shall be one-half of the sum of the two appraisals. The cost of the appraiser selected by the borrower shall be borne by the borrower, and the cost of the appraiser selected by the lender shall be borne by the lender.

(c) A credit for the value of capital improvements shall be provided if the increase in value of the property resulting therefrom is determined pursuant to subdivision (b) to exceed one thousand dollars ($1,000).

(d) If 50 percent or more of the value of the labor or other work on the improvements was performed by the borrower, then the actual cost of the improvements need not exceed one thousand dollars ($1,000) for purposes of making application under subdivision (a).

title: 4. LOAN

article: 4. Improvements

path: 4. LOAN > 7. Shared Appreciation Loans for Seniors > 4. Improvements


text: Nothing in this article shall preclude a shared appreciation loan for seniors from providing the borrower with a greater credit for improvements than specified in this article, provided the relevant disclosures required by Article 7 (commencing with Section 1917.710) are appropriately modified to accurately disclose the terms of the credit.

title: 4. LOAN

article: 4. Improvements


text: The relationship of the borrower and the lender of a shared appreciation loan for seniors is that of debtor and creditor and shall not be, or be construed to be, a joint venture, an equity venture, a partnership, or other relationship.

title: 4. LOAN

article: 5. General Provisions

path: 4. LOAN > 7. Shared Appreciation Loans for Seniors > 5. General Provisions


text: Any waiver of any right of a borrower under the provisions of this chapter shall be void and unenforceable.

title: 4. LOAN

article: 5. General Provisions


text: This chapter facilitates one method of making shared appreciation loans to senior citizens in this state. The terms and conditions of any shared appreciation loan for seniors made pursuant to this chapter shall be consistent with this chapter. This chapter does not, however, apply to or limit shared appreciation financing of real property of a type made pursuant to other provisions of law, or which is not otherwise unlawful. Nothing in this chapter shall be construed in any way to affect shared appreciation financing of residential property of senior citizens not meeting the criteria specified in this chapter.

title: 4. LOAN

article: 5. General Provisions


text:
A shared appreciation loan for seniors shall not be subject to any provision of this code or the Financial Code which limits the interest rate or change of interest rate of variable interest rate or renegotiable interest instruments, or which requires particular language or provisions in security instruments securing variable or renegotiable rate obligations or in evidences of those debts.

This section is declaratory of existing law.

title: 4. LOAN

article: 5. General Provisions


text: The lien of a deed of trust securing a shared appreciation loan for seniors shall include and secure the total loan obligation of the shared appreciation loan for seniors.

title: 4. LOAN

article: 5. General Provisions


text: The lien of a shared appreciation loan for seniors, including the total loan obligation, shall attach from the time of the recordation of the deed of trust securing the loan, and the lien, including the lien of the total loan obligation accrued or to be accrued, shall have priority over any other lien or encumbrance affecting the property secured by the shared appreciation instrument and recorded after the time of recordation of the shared appreciation instrument. However, nothing in this section or Section 1917.614 shall preclude a junior lien or encumbrance subordinate to the total loan obligation of the shared appreciation loan for seniors. In no case may a junior lien achieve priority over the lien securing the total loan obligation of the shared appreciation loan, provided that nothing in this section shall be construed to supersede Section 8450.

history: (History: Amended by Stats. 2010, Ch. 697, Sec. 12. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697.)

title: 4. LOAN

article: 5. General Provisions


text: A shared appreciation loan for seniors which bears a fixed interest rate complying with the usury provisions of Article XV of the California Constitution shall not be deemed to become usurious by reason of the payment of actual contingent interest pursuant to this chapter; provided, however, that in no event may the amount of actual contingent interest received by the lender, plus the stated interest received by the lender, result in an annual percentage rate in excess of 1.5 times the applicable usury rate calculated pursuant to Article XV of the California Constitution, when all of such interest is applied over the actual term of the loan.

title: 4. LOAN

article: 5. General Provisions


text: The qualification requirements of Sections 25110, 25120, and 25130 of the Corporations Code do not apply to a shared appreciation loan for seniors to the extent the exemption afforded by subdivision (p) of Section 25100 of that code is applicable.

title: 4. LOAN

article: 5. General Provisions


text: Any loan made pursuant to this chapter shall be subject to Section 580b of the Code of Civil Procedure.

title: 4. LOAN

article: 5. General Provisions


text:
Pursuant to the authority contained in Section 1 of Article XV of the California Constitution, the restrictions upon rates of interest contained in Section 1 of Article XV of the California Constitution shall not apply to any obligation of any loan made by any lender pursuant to this chapter.

This section creates and authorizes lenders under this chapter as an exempt class of persons pursuant to Section 1 of Article XV of the Constitution.

title: 4. LOAN

article: 5. General Provisions


text:
(a) The disclosures made pursuant to this chapter, as required, shall be the only disclosures required to be made pursuant to state law for shared appreciation loans for seniors, notwithstanding any contrary provision applicable to loans not made under this chapter, except those, if any, that may be required by reason of the application of Division 1 (commencing with Section 25000) of the Corporations Code, or Chapter 1 (commencing with Section 11000) of Part 2 of Division 4 of the Business and Professions Code. However, a lender shall not be precluded from supplementing the disclosures required by this chapter with additional disclosures that are not inconsistent with the disclosures required by this chapter.

(b) Whenever specific language is prescribed by this chapter, substantially the same language shall be utilized if possible, but reasonably equivalent language may be used to the extent necessary or appropriate to achieve a clearer or more accurate disclosure.

title: 4. LOAN

article: 6. Notices and Disclosures

path: 4. LOAN > 7. Shared Appreciation Loans for Seniors > 6. Notices and Disclosures


text:
(a) Each lender offering shared appreciation loans for seniors shall furnish to a prospective borrower, on the earlier of the dates on which the lender first provides written information concerning shared appreciation loans for seniors by the lender or provides a loan application form to the prospective borrower, a written disclosure as provided in this section, in type of not less than 10 point.

(b) The disclosure shall be entitled “INFORMATION ABOUT THE (Name of Lender) SHARED APPRECIATION LOAN FOR SENIORS,” and shall describe the operation and effect of the shared appreciation loan for seniors, including a brief summary of its terms and conditions, together with a statement consisting of substantially the following language, to the extent applicable to such loan: INFORMATION ABOUT THE SHARED APPRECIATION LOANS FOR SENIORS Your lender is pleased to offer you the opportunity to borrow against the equity in your home through a Shared Appreciation Loan for Seniors.

Because the Shared Appreciation Loan for Seniors differs from the usual mortgage loan, the law requires that you have a detailed explanation of the special features of the loan before you apply. Before you sign your particular Shared Appreciation Loan for Seniors documents, you will receive more information about your particular Shared Appreciation Loan for Seniors, which you should read and understand before you sign the loan documents.

Receipt of shared appreciation loan proceeds could be considered income, thereby reducing payments received under government benefit programs, such as Supplemental Security Income (SSI). If this income is accumulated, the payments will be considered a resource, and could terminate your eligibility for SSI or Medi-Cal. See your legal adviser for more information. I GENERAL TERMS A Shared Appreciation Loan for Seniors will provide you with funds to pay off any existing indebtedness on your home and to pay the closing costs for the loan, and will then advance funds to you each month (monthly annuity) (1) for so long as you or your spouse who is a coborrower live; or (2) until you sell the house; or (3) until you decide to refinance the property and pay off your Shared Appreciation Loan for Seniors; or (4) until you cease to occupy the property as your residence, meaning either that the property has been rented out for exclusive use by a nonborrower, or the abandonment by all coborrowers of the property as their residence. Any of these four events are considered “maturity events,” and will constitute the end of the obligation to advance funds to you. The maturity events are described more fully in the promissory note. Your monthly annuity is calculated according to the method described in Section II, below. You will also be required to fulfill any customary terms or conditions included in the deed of trust encumbering your property.

Each advance of funds you receive, including both initial advances (net original loan) and each monthly annuity, will be considered outstanding principal on your loan and will bear a stated interest rate which will be not more than 80 percent of the prevailing rate of interest in the locality in which you live. No payments on your total loan obligation need be made by you until the occurrence of one of the four maturity events described above.

In exchange for a stated interest rate which is below the prevailing rate, you will be obligated to pay us additional interest later, in the form of a share of the appreciation of your home between the time you execute the promissory note and the occurrence of a maturity event. This additional interest is called “actual contingent interest” and is described more fully below at Section III. Once a maturity event has occurred, interest at the prevailing rate compounded not more often than monthly shall accrue on the entire outstanding loan balance, including the actual contingent interest, until repayment in full of the loan.

Balloon Payment of Principal. If you do not sell the property before the occurrence of a maturity event, you or your successors will need to refinance or pay this loan at that time. The term of this loan is until occurrence of a maturity event. However, if the maturity event is cessation of occupancy or death of the borrowers, the term shall be extended until the earlier of the sale or refinancing of the property, or 12 months after occurrence of the maturity event. We will not refinance either the unpaid balance of the loan or the contingent interest at that time; you or your successors alone will be responsible for obtaining refinancing. If you refinance this loan, your monthly payments may increase substantially if the property has appreciated significantly or if the interest rate on the refinancing loan is much higher than today’s prevailing rates. In general, the more your property appreciates, the larger will be the amount of the actual contingent interest that you will have an obligation to pay or refinance.

Tax and Estate Consequences. USE OF THE SHARED APPRECIATION LOAN FOR SENIORS WILL HAVE INCOME TAX OR ESTATE PLANNING CONSEQUENCES WHICH WILL DEPEND UPON YOUR OWN FINANCIAL AND TAX SITUATION. FOR FURTHER INFORMATION, YOU ARE URGED TO CONSULT YOUR OWN ACCOUNTANT, ATTORNEY, OR OTHER FINANCIAL ADVISER.

THE QUESTIONS YOU SHOULD DISCUSS INCLUDE THE TAX DEDUCTIBILITY OF THE CONTINGENT INTEREST PAYMENT, YOUR RIGHT TO UTILIZE THAT DEDUCTION IN YEARS OTHER THAN THE YEAR IT IS PAID, AND THE EFFECT OF THE LOSS OF TAX BENEFITS BEFORE THAT TIME. BECAUSE YOU WILL BE BORROWING A SIGNIFICANT AMOUNT OF THE EQUITY IN YOUR HOME, WHEN A MATURITY EVENT OCCURS AND YOUR LOAN IS REPAID, LITTLE OR NO EQUITY MAY REMAIN FOR YOU OR YOUR HEIRS.

Determining Fair Market Value. If you sell your property, the gross sale price will be the fair market value of the property, unless appraisals are requested by us and the appraisals average more than the gross sale price. However, at your request, we also will tell you what we consider to be the fair market value of the property. If you sell for cash for a gross sale price that equals or exceeds that amount, the gross sale price will control and appraisals will not be needed.

Fair market value is determined by appraisals in the event of sales involving a consideration other than cash, prepayment of the loan in full, or any other maturity event.

When appraisals are required, fair market value is determined by averaging two independent appraisals of the property. You may select one of the two appraisers from a list approved by the Federal National Mortgage Association. If appraisals are requested by us, we will provide you with full information on how to select an appraiser.

In lieu of appraisals, we may establish fair market value at an agreed amount if an agreement can be reached between you and us.

Determining Value of Capital Improvements. Capital improvements with a value exceeding one thousand dollars ($1,000) (but no maintenance or repair costs) may be added to the value of the property for the purpose of determining the net appreciated value, but only if the procedures set forth in the shared appreciation loan documents are followed. It is important to note that capital improvements completed and claimed in any 12-month period must add more than one thousand dollars ($1,000) in value to the property and must generally also cost more than one thousand dollars ($1,000). However, if you have performed at least one-half the value of the labor or other work involved, then the cost of the improvements will not be considered. The appraised value of the improvements will be the increase in the value of the property resulting from the improvements. You will receive no credit for minor or major repairs or for improvements that are not appraised at more than one thousand dollars ($1,000), but the lender will acquire a share of any resulting appreciation in the value of the property. II CALCULATION OF MONTHLY ANNUITY Your Shared Appreciation Loan for Seniors consists of two components: first, an initial advance to cover the cost of paying off any existing liens which you wish to pay off, and to cover closing costs; and second, a monthly annuity.

Your Shared Appreciation Loan for Seniors is designed to provide a monthly stream of funds for the remainder of the lives of the borrowers, with no payments on the loan due at any time during the lives of the borrowers unless the property is sold or the loan is refinanced or repaid in full or until you cease to occupy the property. In determining the amount that it is able to lend, the lender estimates what at least 75 percent of the value of the borrower’s home is likely to be at the end of the borrower’s life expectancy, based on a reasonable projected appreciation rate per year. Borrowers’ estimated life spans are predicted on the basis of “actuarial tables” prepared by the government and the insurance industry; and are based only upon estimated female life span, plus up to five years, to avoid any discriminatory effect between the sexes in determining loan amounts and for conservative lending practices. Once the maximum amount which may be loaned has been determined, the amount necessary to pay off existing liens and for closing costs, plus interest at the stated interest rate on that amount for the borrower’s life expectancy, is subtracted. The “projected contingent interest” that is predicted to have been earned at the end of the estimated life span is also subtracted. A monthly annuity is then calculated on the remaining amount, based on the stated interest and the borrower’s life expectancy.

This complex calculation is illustrated by the following example:

Mr. and Mrs. Smith, who are 73 and 71 years of age, respectively, live in a home with a current value of one hundred fifty thousand dollars ($150,000), and apply for a Shared Appreciation Loan for Seniors. According to acceptable actuarial tables, Mrs. Smith, the younger of the two, has a remaining actuarial life span of 18 years. At the end of the 18 years, at a 4 percent per year projected appreciation rate, the house would be worth three hundred thousand dollars ($300,000), 80 percent of which equals two hundred forty thousand dollars ($240,000) (the lender could have based the calculation on as little as 75 percent of the three hundred thousand dollar ($300,000) projected value). The house currently has a fifteen thousand dollar ($15,000) first mortgage, and closing costs will be approximately two thousand dollars ($2,000), and the Smiths’ wish to receive an initial advance to pay off the mortgage and to cover closing costs.

At the time the Smiths apply, the average of the 30-year fixed interest rate for home mortgages of the Federal Home Loan Mortgage Corporation is 13 percent, which is the “prevailing rate.” The “stated interest rate” on the Smiths’ loan will be 75 percent of the “prevailing rate,” or 934 percent (the lender could have charged up to 80 percent of the prevailing rate).

The Smiths’ payments will be calculated so that at the end of the projected loan term of 18 years, the total of all payments owed to the lender will be two hundred forty thousand dollars ($240,000), 80 percent of the estimated value of the Smiths’ home after 18 years.

Two items must be subtracted from the two hundred forty thousand dollar ($240,000) future value before the Smiths’ payment can be calculated:

(a) Since the Smiths’ are requesting an advance of seventeen thousand dollars ($17,000) to pay off their existing mortgage and for closing costs, seventeen thousand dollars ($17,000), plus interest on seventeen thousand dollars ($17,000) at 934 percent for 18 years, for a total of ninety-six thousand fifty-seven dollars ($96,057), must be subtracted from the two hundred forty thousand dollars ($240,000) available for lending. This leaves one hundred forty-three thousand nine hundred forty-three dollars ($143,943).

(b) The lender’s share of appreciation of the value of the home is also subtracted before calculating the monthly payment. Since the home is projected to increase in value by one hundred fifty thousand dollars ($150,000), the lender’s share, 25 percent, equals thirty-seven thousand five hundred dollars ($37,500). When subtracted from one hundred forty-three thousand nine hundred forty-three dollars ($143,943), this leaves one hundred six thousand four hundred forty-three dollars ($106,443) for monthly payments.

The monthly payment is calculated on the basis of one hundred six thousand four hundred forty-three dollars ($106,443), over an 18-year term with interest at 934 percent. This equals one hundred eighty-four dollars ($184) per month. The Smiths’ will receive one hundred eighty-four dollars ($184) per month until a maturity event occurs.

At the time of occurrence of a maturity event, the Smiths, or their successors, if they are both deceased, will owe the seventeen thousand dollars ($17,000) advanced initially, plus the sum of all the monthly payments of one hundred eighty-four dollars ($184) received by them until the occurrence of the maturity event, plus interest at 934 percent on all of the above from the time the funds were advanced until occurrence of the maturity event, plus actual contingent interest calculated as described in Section III below. Interest, compounded no more often than monthly, on all of the above shall accrue at the prevailing rate from the date of any maturity event until the loan is paid in full.

Because interest accumulates rapidly, when a large initial advance is received, or the projected loan term is relatively long, the monthly payment is significantly lower. For instance, if the Smiths’ were 80 years old, and received no lump-sum advance, their monthly payment would be seven hundred forty-nine dollars ($749) per month.

The longer the loan has been in effect, of course, the greater the amount that will be owed, as monthly payments and interest accumulate, and as the home appreciates in value. Unless the borrowers choose to sell the home or refinance the loan, monthly payments will continue until both are deceased, no matter how long they live so long as they continue to occupy the property. Thus, the total loan obligation is not limited to the projected life span of the borrowers, nor to any set dollar amount, regardless of the projected maximum. Regardless of how much principal has been advanced by Shared Appreciation Loans for Seniors, and regardless of how much stated interest and actual contingent interest have accumulated or been earned, payments will continue. If the borrower lives substantially longer than the actuarial prediction, it is possible that the total of principal and acquired stated interest plus actual contingent interest, may exceed the value of the home. IN NO EVENT, HOWEVER, WILL A BORROWER OR A BORROWER’S ESTATE BE LIABLE ON THE SHARED APPRECIATION LOAN FOR SENIORS IN AN AMOUNT GREATER THAN THE VALUE OF THE HOME.The Smith example can be illustrated as follows:A.$150,000 =Value of home at time of loan.B.$300,000 =Estimated value of home at end of life expectancy (18 years, 4% annual appreciation).C.$240,000 =Loan (80% of B).D.$150,000 =Total appreciation (B less A).E.$ 37,500 =Lender’s share of appreciation (25% × D).F.$ 96,057 =Payoff of preexisting mortgage, plus interest.G.$106,443 =Amount from which monthly payment is calculated (C less E less F).H.$ 184 =Monthly payment (based on G) to the Smiths. At death or other maturity event, the sum of all monthly payments, plus interest, plus the lender’s share of appreciation, plus the amount owing from payoff of the old mortgage, must be paid to the lender.III ACTUAL CONTINGENT INTEREST This Shared Appreciation Loan for Seniors provides that you, as borrower, must pay to the lender, as actual contingent interest, a share of up to 25 percent of the net appreciated value of the real property which secures the loan. This actual contingent interest is due and payable whenever a maturity event occurs. The dollar amount of actual contingent interest, if any, which you will be required to pay cannot be determined at this time. If the property does not appreciate, you will owe us nothing as actual contingent interest, and will only have to repay principal and stated interest. Actual contingent interest will not become due if title to the property is transferred on your death to a spouse who is a coborrower, or where a transfer results from a decree of dissolution of a marriage and a spouse who is a coborrower becomes the sole owner.

Your obligation to pay actual contingent interest and stated interest will reduce the amount of the appreciation, if any, that you will realize on the property over and above its value today. Appreciation will not produce a real gain in your equity in the property unless the appreciation rate exceeds the general inflation rate, but you will be required to pay a portion of the appreciation as actual contingent interest without regard to whether the appreciation has resulted in a real gain.

When your home is sold or refinanced, you normally will receive enough cash to pay the total loan obligation. However, if you sell and provide financing to the buyer, you may possibly not receive enough cash to pay the actual contingent interest, and, in that event, it will be necessary for you to provide cash from other funds. In no event, however, will your total loan obligation exceed the value of your home at the time of occurrence of a maturity event, unless you have willfully caused damage to the property.

Calculating the actual contingent interest. Actual contingent interest will be calculated as follows:FAIR MARKET VALUE OF THE PROPERTY ON DATE OF MATURITY EVENT (Sale Price or Appraised Value)–(less)CURRENT VALUE OF THE PROPERTY–(less)VALUE OF CAPITAL IMPROVEMENTS MADE BY YOU (Must exceed $1,000 in cost. )×(times)LENDER’S APPRECIATION SHARE (up to 25%)=(equals)ACTUAL CONTINGENT INTERESTBelow are answers to two frequently asked questions about the Shared Appreciation Loans for Seniors program. If you have any further questions, feel free to call the lender at ____, or write to the lender at ____.

Question. What if I marry, or my spouse is not a coborrower?

Answer. Your Shared Appreciation Loan for Seniors will be due upon the death of the last surviving coborrower. Your lender will be happy to include a new or present spouse as a coborrower, provided the new spouse is over age __ at the time he or she becomes a coborrower. Because the monthly payment annuity is based upon the projected life span of the youngest coborrower, the annuity will be readjusted if a new, younger coborrower is added. The annuity will be adjusted to reflect the annuity that would have existed had the new coborrower been a coborrower from the beginning of the loan period. Since the monthly annuity is based on a fixed “lendable amount” derived from projected appreciation of the home (see Section II, above), a longer projected loan period, because of the younger age of the new coborrower, will result in a decrease in the size of the monthly annuity.

Question. Can I obtain an additional advance for home improvements?

Answer. Yes, provided your lender approves of the improvement. Your lender will act reasonably in reviewing your request. At the time the advance is made, your lender will calculate the amount of interest at the stated interest rate that will accrue through the projected life of the loan, as it was determined at the time the loan was made. This amount will be deducted from the original lendable amount, and a new annuity calculated, based upon the calculations described in Section II. The effect is the same as if the advance had been made at the outset of the loan, except, of course, you will not be responsible for any interest until the funds are actually advanced. Your annuity will, however, be smaller.

history: (History: Amended by Stats. 1988, Ch. 1406, Sec. 4.)

title: 4. LOAN

article: 6. Notices and Disclosures


text:
(a) Each lender making a shared appreciation loan for seniors shall also furnish to the prospective borrower, prior to the consummation of the loan, the disclosures required by Subpart C of Federal Reserve Board Regulation Z (12 C.F.R. Part 226), including 12 C.F.R. Section 226.18(f), to the extent applicable to the transaction.

(b) The disclosure made pursuant to subdivision (a) and Regulation Z shall be based on the fixed interest rate of the shared appreciation loan for seniors, and shall include a description of the shared appreciation feature, including (1) the conditions for its imposition, the time at which it would be collected, and the limitations on the lender’s share, as required by the Federal Reserve Board in the information published by the board in 46 Federal Register 20877-78 (April 7, 1981), and (2) the lender’s share of the appreciated value and the prevailing interest rate as defined in Section 1917.320.

(c) The disclosure made pursuant to subdivision (a) and Regulation Z shall be accompanied by (1) several transaction-specific examples of the operation and effect of the shared appreciation loan and (2) the following charts comparing the shared appreciation loan and a conventional loan made at the prevailing interest rate, and illustrating the possible increase in the monthly payments, and the possible annual percentage rate of finance charge, on the assumptions therein stated: Chart 1CONVENTIONAL MORTGAGE AT ____%If the same loan balance were financed under a conventional, 30-year, fixed-rate, level-payment mortgage, your monthly payments would be:Years 1–30$_______/mo.Chart 2IF YOU REFINANCE THIS TRANSACTION AT ___%If your property appreciates at 10% per year, and if your loan obligation (including contingent interest due) at the end of __ years is refinanced at __% (the prevailing market interest rate now), your monthly payments will be:Years 1–__Refinancing loan$_______/mo.$_______/mo.**Refinancing loan, assuming a conventional, 30-year, fixed-rate, level-payment mortgage. Other mortgage instruments, e.g., graduated-payment or shared-appreciation, if available, may result in lower payments.Chart 3APR IF PROPERTY APPRECIATES AT 10%If your property appreciates at 10% per year, the total finance charge on your shared appreciation loan for seniors (including contingent interest) will equal $____, and the annual percentage rate of the total finance charge (including actual contingent interest) will equal ____%.(d) The disclosures required by subdivision (c) shall be separate from the disclosures required by Regulation Z, and may be presented in the document containing the disclosures required by Regulation Z or in one or more separate documents.

(e) Except to the extent that this section requires disclosure of additional information not required by Regulation Z, compliance with the applicable credit disclosure requirements of Regulation Z shall constitute compliance with the requirements of this section.

(f) The disclosure prescribed in Section 1917.711 shall be physically attached to the disclosures required by this section and Regulation Z at the time the Regulation Z disclosures are furnished to the borrower.

(g) In the event federal law is amended so that this section is inconsistent therewith, the federal law shall prevail as to the disclosures required by this section.

title: 4. LOAN

article: 6. Notices and Disclosures


text:
Each lender making a shared appreciation loan for seniors shall additionally furnish to the prospective borrower, prior to consummation of the loan, a statement containing the following information: IMPORTANT INFORMATION ABOUT YOUR SHARED APPRECIATION LOAN FOR SENIORS

You are being offered a shared appreciation loan. Before you decide to accept this loan, read this statement, which is designed to provide important information you should consider.

1. Prevailing interest rate: __%.

2. Stated interest rate on this loan: __%.

3. Projected contingent interest: __%.

4. Initial amount of this loan: $__.

5. Amount of the monthly annuity payments you will receive: $__.

6. Projected term of this loan: __ years.

7. Projected total loan obligation you will have to pay, assuming the loan continues to the end of the “borrower’s” life expectancy: $__.

title: 4. LOAN

article: 6. Notices and Disclosures


text: Each deed of trust and evidence of debt executed in connection with a shared appreciation loan for seniors shall contain a statement, printed or written in a size equal to at least 12-point bold type, consisting of substantially the following language: “THIS IS A [DURATION] SHARED APPRECIATION LOAN FOR SENIORS. THE LENDER'S INTEREST INCLUDES [PERCENT] OF THE NET APPRECIATED VALUE OF THE PROPERTY. A BALLOON PAYMENT OF PRINCIPAL WILL BE REQUIRED. FOR FURTHER INFORMATION, READ THE FLYER ENTITLED "INFORMATION ABOUT THE [NAME OF LENDER] SHARED APPRECIATION LOAN FOR SENIORS.”’ The notice required by this section shall be completed to state the terms of the shared appreciation loan and the lender’s share of the net appreciated value.

title: 4. LOAN

article: 6. Notices and Disclosures


text:
As used in this chapter:

(a) “Evidence of debt” means a note or negotiable instrument.

(b) “Secretary” means the Secretary of Business and Consumer Services.

(c) “Secretary’s designee” means the director of a department within the agency that licenses or regulates the institutions, organizations, or persons engaged in a business related to or affecting compliance with this chapter.

(d) “Security document” means a mortgage contract, deed of trust, real estate sales contract, or any note or negotiable instrument issued in connection therewith, when its purpose is to finance the purchase or construction of real property occupied or intended to be occupied by the borrower, containing four or fewer residential units or on which four or fewer residential units are to be constructed.

(e) The amendments made to this section by the act adding this subdivision shall become operative on July 1, 2026.

history: (History: Amended by Stats. 2026, Ch. 28, Sec. 13. (SB 170) Effective June 29, 2026. Operative July 1, 2026, by its own provisions.)

title: 4. LOAN

chapter: 7.5. Mortgage Loans

path: 4. LOAN > 7.5. Mortgage Loans


citation: CIV § 1920

text:
Any mortgage instrument that is made pursuant to the provisions of this chapter shall meet the following requirements:

(a) Standards for the adjustment of interest rates or monthly payments shall consider factors which can reasonably be deemed to affect the ability of borrowers to meet their mortgage obligations.

(b) No change in interest provided for in any provision for a variable interest rate contained in a security document, or evidence of debt issued in connection therewith, shall be valid unless the provision is set forth in the security document, and in any evidence of debt issued in connection therewith, and the document or documents contain the following provisions:

(1) A statement attached to the security document and to any evidence of debt issued in connection therewith printed or written in a size equal to at least 10-point bold type, consisting of language authorized by the secretary or the secretary’s designee notifying the borrower that the mortgage may provide for changes in interest, principal loan balance, payment, or the loan term.

(2) Before the due date of the first monthly installment following each change in the interest rate, notice shall be mailed to the borrower of the following:

(A) The base index.

(B) The most recently published index at the date of the change in the rate.

(C) The interest rate in effect as a result of the change.

(D) Any change in the monthly installment.

(E) The amount of the unpaid principal balance.

(F) If the interest scheduled to be paid on the due date exceeds the amount of the installment, a statement to that effect and the amount of the excess, and the address and telephone number of the office of the lender to which inquiries may be made.

(c) The borrower is permitted to prepay the loan in whole or in part without a prepayment charge at any time, and no fee or other charge may be required by the lender of the borrower as a result of any change in the interest rate, the payment, the outstanding principal loan balance, or the loan term.

(d) Changes in the rate of interest on the loan shall reflect the movement of an index, which shall be authorized by the secretary or the secretary’s designee.

(e) To the extent that any monthly installment is less than the amount of interest accrued during the month with respect to which the installment is payable, the borrower shall be notified of such instance in a form and manner prescribed by the secretary or the secretary’s designee. Such notice shall include, but not be limited to, the amount of interest exceeding the monthly installment, and any borrower options under these circumstances.

(f) The lender shall provide to the borrower, prior to the execution by the borrower of any mortgage payment instrument authorized pursuant to this chapter, full and complete disclosure, as specified by the secretary or the secretary’s designee, of the nature and effect of the mortgage payment instrument, and all costs or savings attributed to the mortgage instrument.

history: (History: Amended by Stats. 1997, Ch. 232, Sec. 24. Effective January 1, 1998.)

title: 4. LOAN


citation: CIV § 1921

text:
(a) As used in this section:

(1) “Adjustable-rate residential mortgage loan” means any loan or credit sale which is primarily for personal, family, or household purposes which bears interest at a rate subject to change during the term of the loan, whether predetermined or otherwise, and which is made upon the security of real property containing not less than one nor more than four dwelling units.

(2) “Lender” means any person, association, corporation, partnership, limited partnership, or other business entity making, in any 12-month period, more than 10 loans or credit sales upon the security of residential real property containing not less than one nor more than four dwelling units.

(b) Any lender offering adjustable-rate residential mortgage loans shall provide to prospective borrowers a copy of the most recent available publication of the Federal Reserve Board that is designed to provide the public with descriptive information concerning adjustable-rate mortgages (currently entitled “Consumer Handbook on Adjustable Rate Mortgages”), either upon the prospective borrower’s request or at the same time the lender first provides written information, other than direct-mail advertising, concerning any adjustable-rate residential mortgage loan or credit sale to the prospective borrower, whichever is earlier. Any lender who fails to comply with the requirements of this section may be enjoined by any court of competent jurisdiction and shall be liable for actual damages, the costs of the action, and reasonable attorney’s fees as determined by the court. The court may make those orders as may be necessary to prevent future violations of this section.

(c) A lender that makes adjustable-rate mortgage loan disclosures pursuant to either Part 29 of Chapter I of, or Part 563 of Chapter V of, Title 12 of the Code of Federal Regulations, may comply with this section by providing the descriptive information required by subdivision (b) at the same time and under the same circumstances that it makes disclosures in accordance with those federal regulations. Such a lender shall also display and make the descriptive information available to the public in an area of the lender’s office that is open to the public.

history: (History: Amended by Stats. 1987, Ch. 56, Sec. 19.)

title: 4. LOAN


citation: CIV § 1923

text:
For purposes of this chapter, “reverse mortgage” means a nonrecourse loan secured by real property that meets all of the following criteria:

(a) The loan provides cash advances to a borrower based on the equity or the value in a borrower’s owner-occupied principal residence.

(b) The loan requires no payment of principal or interest until the entire loan becomes due and payable.

(c) The loan is made by a lender licensed or chartered pursuant to the laws of this state or the United States.

history: (History: Added by Stats. 1997, Ch. 797, Sec. 1. Effective January 1, 1998.)

title: 4. LOAN

chapter: 8. Reverse Mortgages

path: 4. LOAN > 8. Reverse Mortgages


text:
A reverse mortgage loan shall comply with all of the following requirements:

(a) Prepayment, in whole or in part, shall be permitted without penalty at any time during the term of the reverse mortgage loan. For the purposes of this section, penalty does not include any fees, payments, or other charges that would have otherwise been due upon the reverse mortgage being due and payable.

(b) A reverse mortgage loan may provide for a fixed or adjustable interest rate or combination thereof, including compound interest, and may also provide for interest that is contingent on the value of the property upon execution of the loan or at maturity, or on changes in value between closing and maturity.

(c) A reverse mortgage may include costs and fees that are charged by the lender, or the lender’s designee, originator, or servicer, including costs and fees charged upon execution of the loan, on a periodic basis, or upon maturity.

(d) If a reverse mortgage loan provides for periodic advances to a borrower, these advances shall not be reduced in amount or number based on any adjustment in the interest rate.

(e) A lender who fails to make loan advances as required in the loan documents, and fails to cure an actual default after notice as specified in the loan documents, shall forfeit to the borrower treble the amount wrongfully withheld plus interest at the legal rate.

(f) The reverse mortgage loan may become due and payable upon the occurrence of any one of the following events:

(1) The home securing the loan is sold or title to the home is otherwise transferred.

(2) All borrowers cease occupying the home as a principal residence, except as provided in subdivision (g).

(3) Any fixed maturity date agreed to by the lender and the borrower occurs.

(4) An event occurs which is specified in the loan documents and which jeopardizes the lender’s security.

(g) Repayment of the reverse mortgage loan shall be subject to the following additional conditions:

(1) Temporary absences from the home not exceeding 60 consecutive days shall not cause the mortgage to become due and payable.

(2) Extended absences from the home exceeding 60 consecutive days, but less than one year, shall not cause the mortgage to become due and payable if the borrower has taken prior action which secures and protects the home in a manner satisfactory to the lender, as specified in the loan documents.

(3) The lender’s right to collect reverse mortgage loan proceeds shall be subject to the applicable statute of limitations for written loan contracts. Notwithstanding any other provision of law, the statute of limitations shall commence on the date that the reverse mortgage loan becomes due and payable as provided in the loan agreement.

(4) The lender shall prominently disclose in the loan agreement any interest rate or other fees to be charged during the period that commences on the date that the reverse mortgage loan becomes due and payable, and that ends when repayment in full is made.

(h) The first page of any deed of trust securing a reverse mortgage loan shall contain the following statement in 10-point boldface type: “This deed of trust secures a reverse mortgage loan.”

(i) A lender or any other person that participates in the origination of the mortgage shall not require an applicant for a reverse mortgage to purchase an annuity as a condition of obtaining a reverse mortgage loan.

(1) The lender or any other person that participates in the origination of the mortgage shall not do either of the following:

(A) Participate in, be associated with, or employ any party that participates in or is associated with any other financial or insurance activity, unless the lender maintains procedural safeguards designed to ensure that individuals participating in the origination of the mortgage shall have no involvement with, or incentive to provide the prospective borrower with, any other financial or insurance product.

(B) Refer the borrower to anyone for the purchase of an annuity or other financial or insurance product prior to the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement.

(2) This subdivision does not prevent a lender from offering or referring borrowers for title insurance, hazard, flood, or other peril insurance, or other similar products that are customary and normal under a reverse mortgage loan.

(3) A lender or any other person who participates in the origination of a reverse mortgage loan to which this subdivision would apply, and who complies with paragraph (1) of subsection (n), and with subsection (o), of Section 1715z-20 of Title 12 of the United States Code, and any regulations and guidance promulgated under that section, as amended from time to time, in offering the loan, regardless of whether the loan is originated pursuant to the program authorized under Section 1715z-20 of Title 12 of the United States Code, and any regulations and guidance promulgated under that section, shall be deemed to have complied with this subdivision.

(j) Prior to accepting a final and complete application for a reverse mortgage the lender shall provide the borrower with a list of not fewer than 10 counseling agencies that are approved by the United States Department of Housing and Urban Development to engage in reverse mortgage counseling as provided in Subpart B of Part 214 of Title 24 of the Code of Federal Regulation. The counseling agency shall not receive any compensation, either directly or indirectly, from the lender or from any other person or entity involved in originating or servicing the mortgage or the sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product. This subdivision does not prevent a counseling agency from receiving financial assistance that is unrelated to the offering or selling of a reverse mortgage loan and that is provided by the lender as part of charitable or philanthropic activities.

(k) A lender shall not accept a final and complete application for a reverse mortgage loan from a prospective applicant or assess any fees upon a prospective applicant until the lapse of seven days from the date of counseling, as evidenced by the counseling certification, and without first receiving certification from the applicant or the applicant’s authorized representative that the applicant has received counseling from an agency as described in subdivision (j) and that the counseling was conducted in person, unless the certification specifies that the applicant elected to receive the counseling in a manner other than in person. The certification shall be signed by the borrower and the agency counselor, and shall include the date of the counseling and the name, address, and telephone number of both the counselor and the applicant. Electronic facsimile copy of the housing counseling certification satisfies the requirements of this subdivision. The lender shall maintain the certification in an accurate, reproducible, and accessible format for the term of the reverse mortgage.

(l) A lender shall not make a reverse mortgage loan without first complying with, or in the case of brokered loans ensuring compliance with, the requirements of Section 1632, if applicable.

history: (History: Amended by Stats. 2014, Ch. 854, Sec. 2. (AB 1700) Effective January 1, 2015.)

title: 4. LOAN


text: A reverse mortgage shall constitute a lien against the subject property to the extent of all advances made pursuant to the reverse mortgage and all interest accrued on these advances, and that lien shall have priority over any lien filed or recorded after recordation of a reverse mortgage loan.

title: 4. LOAN


text: For the purposes of this chapter, a property shall be deemed to be owner-occupied, notwithstanding that the legal title to the property is held in the name of a trust, provided that the occupant of the property is a beneficiary of that trust.

title: 4. LOAN


text:
(a) No reverse mortgage loan application shall be taken by a lender unless the loan applicant, prior to receiving counseling, has received from the lender the following plain language statement in conspicuous 16-point type or larger, advising the prospective borrower about counseling prior to obtaining the reverse mortgage loan:

IMPORTANT NOTICE TO REVERSE MORTGAGE LOAN APPLICANT

A REVERSE MORTGAGE IS A COMPLEX FINANCIAL TRANSACTION. IF YOU DECIDE TO OBTAIN A REVERSE MORTGAGE LOAN, YOU WILL SIGN BINDING LEGAL DOCUMENTS THAT WILL HAVE IMPORTANT LEGAL AND FINANCIAL IMPLICATIONS FOR YOU AND YOUR ESTATE. IT IS THEREFORE IMPORTANT TO UNDERSTAND THE TERMS OF THE REVERSE MORTGAGE AND ITS EFFECT ON YOUR FUTURE NEEDS. BEFORE ENTERING INTO THIS TRANSACTION, YOU ARE REQUIRED TO CONSULT WITH AN INDEPENDENT REVERSE MORTGAGE LOAN COUNSELOR TO DISCUSS WHETHER OR NOT A REVERSE MORTGAGE IS RIGHT FOR YOU. A LIST OF APPROVED COUNSELORS WILL BE PROVIDED TO YOU BY THE LENDER.

SENIOR CITIZEN ADVOCACY GROUPS ADVISE AGAINST USING THE PROCEEDS OF A REVERSE MORTGAGE TO PURCHASE AN ANNUITY OR RELATED FINANCIAL PRODUCTS. IF YOU ARE CONSIDERING USING YOUR PROCEEDS FOR THIS PURPOSE, YOU SHOULD DISCUSS THE FINANCIAL IMPLICATIONS OF DOING SO WITH YOUR COUNSELOR AND FAMILY MEMBERS. (b) (1) In addition to the plain language notice described in subdivision (a), no reverse mortgage loan application shall be taken by a lender unless the lender provides the prospective borrower, prior to his or her meeting with a counseling agency on reverse mortgages, with a reverse mortgage worksheet guide, or in the event that the prospective borrower seeks counseling prior to requesting a reverse mortgage loan application from the reverse mortgage lender, the counseling agency shall provide the prospective borrower with the following plain language reverse mortgage worksheet guide in 14-point type or larger:

Reverse Mortgage Worksheet Guide—Is a Reverse Mortgage Right for Me?

To decide if a recommended purchase of a reverse mortgage is right for you, consider all of your goals, needs, and available options. This self-evaluation worksheet has five essential questions for you to consider when deciding if a reverse mortgage is right for you.

Directions: The State of California advises you to carefully read and complete this worksheet, and bring it with you to your counseling session. You may make notes on a separate piece of paper with questions you may have about whether a reverse mortgage is right for you. During the counseling session, you can speak openly and confidentially with a professional reverse mortgage counselor, independent of the lender, who can help you understand what it means for you to become involved with this particular loan.

1. What happens to others in your home after you die or move out?

Rule: When the borrower dies, moves, or is absent from the home for 12 consecutive months, the loan may become due.

Considerations: Having a reverse mortgage affects the future of all those living with you. If the loan cannot be paid off, then the home will have to be sold in order to satisfy the lender. To determine if this is an issue for you, ask yourself:

(A) Who is currently living in the home with you?

(B) What will they do when you die or permanently move from the home?

(C) Have you discussed this with all those living with you or any family members?

(D) Who will pay off the loan, and have you discussed this with them?

(E) If your heirs do not have enough money to pay off the loan, the home will pass into foreclosure.

Do you need to discuss this with your counselor? Yes or No

2. Do you know that you can default on a reverse mortgage?

Rule: There are three continuous financial obligations. If you fail to keep up with your insurance, property taxes, and home maintenance, you will go into default. Uncured defaults lead to foreclosures.

Considerations: Will you have adequate resources and income to support your financial needs and obligations once you have removed all of your available equity with a reverse mortgage? To determine if this is an issue for you, ask yourself:

(A) Are you contemplating a lump-sum withdrawal?

(B) What other resources will you have once you have reached your equity withdrawal limit?

(C) Will you have funds to pay for unexpected medical expenses?

(D) Will you have the ability to finance alternative living accommodations, such as independent living, assisted living, or a long-term care nursing home?

(E) Will you have the ability to finance routine or catastrophic home repairs, especially if maintenance is a factor that may determine when the mortgage becomes payable?

Do you need to discuss this with your counselor? Yes or No

3. Have you fully explored other options?

Rule: Less costly options may exist.

Consideration: Reverse mortgages are compounding-interest loans, and the debt to the lender increases as time goes on. You may want to consider using less expensive alternatives or other assets you may have before you commit to a reverse mortgage. To determine if this is an issue for you, consider:

(A) Alternative financial options for seniors may include, but not be limited to, less costly home equity lines of credit, property tax deferral programs, or governmental aid programs.

(B) Other types of lending arrangements may be available and less costly. You may be able to use your home equity to secure loans from family members, friends, or would-be heirs.

Do you need to discuss this with your counselor? Yes or No

4. Are you intending to use the reverse mortgage to purchase a financial product?

Rule: Reverse mortgages are interest-accruing loans.

Considerations: Due to the high cost and increasing debt incurred by reverse mortgage borrowers, using home equity to finance investments is not suitable in most instances. To determine if this is an issue for you, consider:

(A) The cost of the reverse mortgage loan may exceed any financial gain from any product purchased.

(B) Will the financial product you are considering freeze or otherwise tie up your money?

(C) There may be high surrender fees, service charges, or undisclosed costs on the financial products purchased with the proceeds of a reverse mortgage.

(D) Has the sales agent offering the financial product discussed suitability with you?

Do you need to discuss this with your counselor? Yes or No

5. Do you know that a reverse mortgage may impact your eligibility for government assistance programs?

Rule: Income received from investments will count against individuals seeking government assistance.

Considerations: Converting your home equity into investments may create nonexempt asset statuses. To determine if this is an issue for you, consider:

(A) There are state and federal taxes on the income investments financed through home equity.

(B) If you go into a nursing home for an extended period of time, the reverse mortgage loan will become due, the home may be sold, and any proceeds from the sale of the home may make you ineligible for government benefits.

(C) If the homeowner is a Medi-Cal beneficiary, a reverse mortgage may make it difficult to transfer ownership of the home, thus resulting in Medi-Cal recovery.

Do you need to discuss this with your counselor? Yes or No

(2) The reverse mortgage worksheet guide required in paragraph (1) shall be signed by the agency counselor, if the counseling is done in person, and by the prospective borrower and returned to the lender along with the certification of counseling required under subdivision (k) of Section 1923.2, and the loan application shall not be approved until the signed reverse mortgage worksheet guide is provided to the lender. A copy of the reverse mortgage worksheet guide shall be provided to the borrower.

history: (History: Amended by Stats. 2014, Ch. 854, Sec. 3. (AB 1700) Effective January 1, 2015.)

title: 4. LOAN


text: The lender shall be presumed to have satisfied any disclosure duty imposed by this chapter if the lender provides a disclosure statement in the same form as provided in this chapter.

title: 4. LOAN


text: No arrangement, transfer, or lien subject to this chapter shall be invalidated solely because of the failure of a lender to comply with any provision of this chapter. However, nothing in this section shall preclude the application of any other existing civil remedies provided by law.

title: 4. LOAN


text:
(a) To the extent that implementation of this section does not conflict with federal law resulting in the loss of federal funding, reverse mortgage loan payments made to a borrower shall be treated as proceeds from a loan and not as income for the purpose of determining eligibility and benefits under means-tested programs of aid to individuals.

(b) Undisbursed reverse mortgage funds shall be treated as equity in the borrower’s home and not as proceeds from a loan, resources, or assets for the purpose of determining eligibility and benefits under means-tested programs of aid to individuals.

(c) This section applies to any law or program relating to payments, allowances, benefits, or services provided on a means-tested basis, by this state, including, but not limited to, optional state supplements to the federal supplemental security income program, low-income energy assistance, property tax relief, general assistance, and medical assistance only to the extent this section does not conflict with Title 19 of the federal Social Security Act.

(d) For the purposes of this section, “means-tested programs and aid to individuals” includes, but is not limited to, programs set forth in Chapter 2 (commencing with Section 11200) of Part 3 of Division 9, and Part 5 (commencing with Section 17000) of Division 9, of the Welfare and Institutions Code.

title: 4. LOAN


text: This chapter shall only apply to those reverse mortgage loans executed on or after January 1, 1998.

title: 4. LOAN


citation: CIV § 1925

text: Hiring is a contract by which one gives to another the temporary possession and use of property, other than money, for reward, and the latter agrees to return the same to the former at a future time.

history: (History: Enacted 1872.)

title: 5. HIRING

chapter: 1. Hiring in General

path: 5. HIRING > 1. Hiring in General


citation: CIV § 1926

text: The products of a thing hired, during the hiring, belong to the hirer.

title: 5. HIRING


citation: CIV § 1927

text: An agreement to let upon hire binds the letter to secure to the hirer the quiet possession of the thing hired during the term of the hiring, against all persons lawfully claiming the same.

title: 5. HIRING


citation: CIV § 1928

text: The hirer of a thing must use ordinary care for its preservation in safety and in good condition.

title: 5. HIRING


citation: CIV § 1929

text: The hirer of a thing must repair all deteriorations or injuries thereto occasioned by his want of ordinary care.

history: (History: Amended by Stats. 1905, Ch. 454.)

title: 5. HIRING


citation: CIV § 1930

text: When a thing is let for a particular purpose the hirer must not use it for any other purpose; and if he does, he is liable to the letter for all damages resulting from such use, or the letter may treat the contract as thereby rescinded.

title: 5. HIRING


citation: CIV § 1931

text:
The letter of a thing may terminate the hiring and reclaim the thing before the end of the term agreed upon:

1. When the hirer uses or permits a use of the thing hired in a manner contrary to the agreement of the parties; or,

2. When the hirer does not, within a reasonable time after request, make such repairs as he is bound to make.

title: 5. HIRING


citation: CIV § 1932

text:
The hirer of a thing may terminate the hiring before the end of the term agreed upon:

1. When the letter does not, within a reasonable time after request, fulfill his obligations, if any, as to placing and securing the hirer in the quiet possession of the thing hired, or putting it into good condition, or repairing; or,

2. When the greater part of the thing hired, or that part which was and which the letter had at the time of the hiring reason to believe was the material inducement to the hirer to enter into the contract, perishes from any other cause than the want of ordinary care of the hirer.

title: 5. HIRING


citation: CIV § 1933

text:
The hiring of a thing terminates:

1. At the end of the term agreed upon;

2. By the mutual consent of the parties;

3. By the hirer acquiring a title to the thing hired superior to that of the letter; or,

4. By the destruction of the thing hired.

title: 5. HIRING


citation: CIV § 1934

text: If the hiring of a thing is terminable at the pleasure of one of the parties, it is terminated by notice to the other of his death or incapacity to contract. In other cases it is not terminated thereby.

title: 5. HIRING


text:
Notwithstanding the provisions of Section 1934, the hiring of accommodations from month to month in a nursing or convalescent home shall be terminated by the death of the patient by or for whom the hiring was made. The hirer or his heir, legatee, or personal representative shall not be liable for any rent due for such accommodations under the hiring agreement beyond that rent due for the date on which such patient died. No advance payment of rent made by the hirer shall be subject to the claim of, or retention by, the nursing or convalescent home and shall be returned to the heir, legatee, or personal representative no later than two weeks after such patient has died. Any provision in the hiring agreement by which the hirer agrees to modify or waive any of his rights under this section shall be void as contrary to public policy.

The provisions of this section shall be applicable to all hiring agreements executed on or after January 1, 1979.

history: (History: Added by Stats. 1978, Ch. 628.)

title: 5. HIRING


citation: CIV § 1935

text: When the hiring of a thing is terminated before the time originally agreed upon, the hirer must pay the due proportion of the hire for such use as he has actually made of the thing, unless such use is merely nominal, and of no benefit to him.

title: 5. HIRING


citation: CIV § 1938

text:
(a) A commercial property owner or lessor shall state on every lease form or rental agreement executed on or after January 1, 2017, whether or not the subject premises have undergone inspection by a Certified Access Specialist (CASp).

(b) If the subject premises have undergone inspection by a CASp and, to the best of the commercial property owner’s or lessor’s knowledge, there have been no modifications or alterations completed or commenced between the date of the inspection and the date of the lease or rental agreement that have impacted the subject premises’ compliance with construction-related accessibility standards, the commercial property owner or lessor shall provide, prior to execution of the lease or rental agreement, a copy of any report prepared by the CASp with an agreement from the prospective lessee or tenant that information in the report shall remain confidential, except as necessary for the tenant to complete repairs and corrections of violations of construction-related accessibility standards that the lessee or tenant agrees to make.

(c) Making any repairs or modifications necessary to correct violations of construction-related accessibility standards that are noted in a CASp report is presumed to be the responsibility of the commercial property owner or lessor, unless otherwise mutually agreed upon by the commercial property owner or lessor and the lessee or tenant. The prospective lessee or tenant shall have the opportunity to review any CASp report prior to execution of the lease or rental agreement. If the report is not provided to the prospective lessee or tenant at least 48 hours prior to execution of the lease or rental agreement, the prospective lessee or tenant shall have the right to rescind the lease or rental agreement, based upon the information contained in the report, for 72 hours after execution of the agreement.

(d) If the subject premises have been issued an inspection report by a CASp, as described in paragraph (1) of subdivision (a) of Section 55.53, indicating that it meets applicable standards, as defined in paragraph (4) of subdivision (a) of Section 55.52, the commercial property owner or lessor shall provide a copy of the current disability access inspection certificate and any inspection report to the lessee or tenant not already provided pursuant to subdivision (b) within seven days of the date of the execution of the lease form or rental agreement.

(e) If the subject premises have not been issued a disability access inspection certificate, as described in subdivision (e) of Section 55.53, the commercial property owner or lessor shall state the following on the lease form or rental agreement: “A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.” (f) As used in this section, “commercial property” means property that is offered for rent or lease to persons operating, or intending to operate, a place of public accommodation as defined in Section 202 of Chapter 2 of Part 2 of Title 24 of the California Code of Regulations, or a facility to which the general public is invited, at those premises.

history: (History: Amended by Stats. 2018, Ch. 92, Sec. 37. (SB 1289) Effective January 1, 2019.)

title: 5. HIRING


text:
For the purpose of this chapter, the following definitions shall apply:

(a) “Rental company” means a person or entity in the business of renting passenger vehicles to the public.

(b) “Renter” means any person in a manner obligated under a contract for the lease or hire of a passenger vehicle from a rental company for a period of less than 30 days.

(c) “Additional mandatory charges” means any separately stated charges that the rental company requires the renter to pay to hire or lease the vehicle for the period of time to which the rental rate applies, which are imposed by a governmental entity and specifically relate to the operation of a rental vehicle business, including, but not limited to, a customer facility charge, airport concession fee, tourism commission assessment, vehicle license recovery fee, or other government-imposed taxes or fees.

(d) “Airport concession fee” means a charge collected by a rental company from a renter that is the renter’s proportionate share of the amount paid by the rental company to the owner or operator of an airport for the right or privilege of conducting a vehicle rental business on the airport’s premises.

(e) “Authorized driver” means all of the following:

(1) The renter.

(2) The renter’s spouse, if that person is a licensed driver and satisfies the rental company’s minimum age requirement.

(3) The renter’s employer or coworker, if the employer or coworker is engaged in business activity with the renter, is a licensed driver, and satisfies the rental company’s minimum age requirement.

(4) A person expressly listed by the rental company on that renter’s contract as an authorized driver.

(f) “Customer facility charge” means any fee, including an alternative fee, required by an airport to be collected by a rental company from a renter pursuant to Section 50474.21 of the Government Code.

(g) “Damage waiver” means a rental company’s agreement not to hold a renter liable for all or any portion of any damage or loss related to the rented vehicle, any loss of use of the rented vehicle, or any storage, impound, towing, or administrative charges.

(h) “Electronic surveillance technology” means a technological method or system used to observe, monitor, or collect information, including telematics, Global Positioning System (GPS), wireless technology, or location-based technologies. “Electronic surveillance technology” does not include event data recorders (EDR), sensing and diagnostic modules (SDM), or other systems that are used either:

(1) For the purpose of identifying, diagnosing, or monitoring functions related to the potential need to repair, service, or perform maintenance on the rental vehicle.

(2) As part of the vehicle’s airbag sensing and diagnostic system in order to capture safety systems-related data for retrieval after a crash has occurred or in the event that the collision sensors are activated to prepare the decisionmaking computer to make the determination to deploy or not to deploy the airbag.

(i) “Estimated time for replacement” means the number of hours of labor, or fraction thereof, needed to replace damaged vehicle parts as set forth in collision damage estimating guides generally used in the vehicle repair business and commonly known as “crash books.”

(j) “Estimated time for repair” means a good faith estimate of the reasonable number of hours of labor, or fraction thereof, needed to repair damaged vehicle parts.

(k) “Membership program” means a service offered by a rental company that permits customers to bypass the rental counter and go directly to the vehicle previously reserved or select an alternate vehicle. A membership program shall meet all of the following requirements:

(1) The renter initiates enrollment by completing an application on which the renter can specify a preference for type of vehicle and acceptance or declination of optional services.

(2) The rental company fully discloses, prior to the enrollee’s first rental as a participant in the program, all terms and conditions of the rental agreement as well as all required disclosures.

(3) The renter may terminate enrollment at any time.

(4) The rental company fully explains to the renter that designated preferences, as well as acceptance or declination of optional services, may be changed by the renter at any time for the next and future rentals.

(5) An employee is available at the lot where the renter takes possession of the vehicle, to receive any change in the rental agreement from the renter.

(l) “Passenger vehicle” or “vehicle” means a “passenger vehicle” as defined in Section 465 of the Vehicle Code.

(m) “Personal vehicle sharing program” means a person or entity that for monetary compensation facilitates sharing or renting passenger vehicles to the public, including via a peer-to-peer internet website, application, or other platform that connects a vehicle owner with a vehicle driver to facilitate sharing or renting a vehicle for consideration, and includes a personal vehicle sharing program as defined in Section 11580.24 of the Insurance Code.

(n) “Quote” means an estimated cost of rental provided by a rental company or a third party to a potential customer that is based on information provided by the potential customer and used to generate an estimated cost of rental, including, but not limited to, potential dates of rental, locations, or classes of vehicle.

(o) “Tourism commission assessment” means the charge collected by a rental company from a renter that has been established by the California Travel and Tourism Commission pursuant to Section 13995.65 of the Government Code.

(p) “Vehicle license fee” means the tax imposed pursuant to the Vehicle License Fee Law (Part 5 (commencing with Section 10701) of Division 2 of the Revenue and Taxation Code).

(q) “Vehicle registration fee” means any fee imposed pursuant to any provision of Chapter 6 (commencing with Section 9101) of Division 3 of the Vehicle Code or any other law that imposes a fee upon the registration of vehicles in this state.

(r) “Vehicle license recovery fee” means a charge that seeks to recover the amount of any vehicle license fee and vehicle registration fee paid by a rental company for the particular class of vehicle being rented. If imposed, the vehicle license recovery fee shall be separately stated as a single charge in the quote and rental contract.

history: (History: Amended by Stats. 2023, Ch. 547, Sec. 1. (AB 893) Effective January 1, 2024.)

title: 5. HIRING

path: 5. HIRING > 1.5. Rental Passenger Vehicle Transactions


text:
Except as limited by Section 1939.05, a rental company and a renter may agree that the renter will be responsible for no more than all of the following:

(a) Physical or mechanical damage to the rented vehicle up to its fair market value, as determined in the customary market for the sale of that vehicle, resulting from collision regardless of the cause of the damage.

(b) (1) Loss due to theft of the rented vehicle up to its fair market value, as determined in the customary market for the sale of that vehicle, provided that the rental company establishes by clear and convincing evidence that the renter or the authorized driver failed to exercise ordinary care while in possession of the vehicle. In addition, the renter shall be presumed to have no liability for any loss due to theft if both of the following conditions are met:

(A) An authorized driver returns the ignition key furnished by the rental company.

(B) An authorized driver files an official report of the theft with the police or other law enforcement agency within 24 hours of learning of the theft and reasonably cooperates with the rental company and the police or other law enforcement agency in providing information concerning the theft.

(2) The presumption set forth in this subdivision is a presumption affecting the burden of proof which the rental company may rebut by establishing that an authorized driver committed, or aided and abetted the commission of, the theft.

(c) Physical damage to the rented vehicle up to its fair market value, as determined in the customary market for the sale of that vehicle, resulting from vandalism occurring after, or in connection with, the theft of the rented vehicle. However, the renter shall have no liability for any damage due to vandalism if the renter would have no liability for theft pursuant to subdivision (b).

(d) Physical damage to the rented vehicle up to a total of five hundred dollars ($500) resulting from vandalism unrelated to the theft of the rented vehicle.

(e) Actual charges for towing, storage, and impound fees paid by the rental company if the renter is liable for damage or loss.

(f) An administrative charge, which shall include the cost of appraisal and all other costs and expenses incident to the damage, loss, repair, or replacement of the rented vehicle.

history: (History: Amended by Stats. 2025, Ch. 449, Sec. 1. (AB 1197) Effective January 1, 2026.)

title: 5. HIRING

chapter: 1.5. Rental Passenger Vehicle Transactions


text:
(a) The total amount of the renter’s liability to the rental company resulting from damage to the rented vehicle shall not exceed the sum of the following:

(1) The estimated cost of parts which the rental company would have to pay to replace damaged vehicle parts.

(2) The estimated cost of labor to replace damaged vehicle parts, which shall not exceed the product of (A) the rate for labor usually paid by the rental company to replace vehicle parts of the type that were damaged and (B) the estimated time for replacement.

(3) The estimated cost of labor to repair damaged vehicle parts, which shall not exceed the lesser of the following:

(A) The product of the rate for labor usually paid by the rental company to repair vehicle parts of the type that were damaged and the estimated time for repair.

(B) The sum of the estimated labor and parts costs determined under paragraphs (1) and (2) to replace the same vehicle parts.

(4) Actual charges for towing, storage, and impound fees paid by the rental company.

(b) For purposes of subdivision (a), all discounts and price reductions or adjustments that are or will be received by the rental company shall be subtracted from the estimate to the extent not already incorporated in the estimate, or otherwise promptly credited or refunded to the renter.

(c) For the purpose of converting the estimated time for repair into the same units of time in which the rental rate is expressed, a day shall be deemed to consist of eight hours.

(d) The administrative charge described in subdivision (f) of Section 1939.03 shall not exceed (1) fifty dollars ($50) if the total estimated cost for parts and labor is more than one hundred dollars ($100) up to and including five hundred dollars ($500), (2) one hundred dollars ($100) if the total estimated cost for parts and labor exceeds five hundred dollars ($500) up to and including one thousand five hundred dollars ($1,500), or (3) one hundred fifty dollars ($150) if the total estimated cost for parts and labor exceeds one thousand five hundred dollars ($1,500). An administrative charge shall not be imposed if the total estimated cost of parts and labor is one hundred dollars ($100) or less.

(e) The total amount of an authorized driver’s liability to the rental company, if any, for damage occurring during the authorized driver’s operation of the rented vehicle shall not exceed the amount of the renter’s liability under this section.

(f) A rental company shall not recover from an authorized driver an amount exceeding the renter’s liability under this section.

history: (History: Added by Stats. 2016, Ch. 183, Sec. 5. (AB 2051) Effective January 1, 2017.)

title: 5. HIRING


text:
(a) A claim against a renter resulting from damage or loss, excluding loss of use, to a rental vehicle shall be reasonably and rationally related to the actual loss incurred. A rental company shall mitigate damages where possible and shall not assert or collect a claim for physical damage which exceeds the actual costs of the repairs performed or the estimated cost of repairs, if the rental company chooses not to repair the vehicle, including all discounts and price reductions. However, if the vehicle is a total loss vehicle, the claim shall not exceed the total loss vehicle value established in accordance with procedures that are customarily used by insurance companies when paying claims on total loss vehicles, less the proceeds from salvaging the vehicle, if those proceeds are retained by the rental company.

(b) If insurance coverage exists under the renter’s applicable personal or business insurance policy and the coverage is confirmed during regular business hours, the renter may require that the rental company submit any claims to the renter’s applicable personal or business insurance carrier. The rental company shall not make any written or oral representations that it will not present claims or negotiate with the renter’s insurance carrier. For purposes of this subdivision, confirmation of coverage includes telephone confirmation from insurance company representatives during regular business hours. Upon request of the renter and after confirmation of coverage, the amount of claim shall be resolved between the insurance carrier and the rental company. The renter shall remain responsible for payment to the rental company for any loss sustained that the renter’s applicable personal or business insurance policy does not cover.

(c) A rental company shall not recover from an authorized driver for an item described in Section 1939.03 to the extent the rental company obtains recovery from another person.

(d) This chapter applies only to the maximum liability of an authorized driver to the rental company resulting from damage to the rented vehicle and not to the liability of another person.

title: 5. HIRING